A pair of former executives of the New York Islanders hockey team has been arrested, capping off a busy day for alleged hedge fund fraud.

Paul Greenwood and Stephen Walsh, principals of hedge fund Westridge Capital Management and Greenwich, Conn.-based WG Trading Co., have been charged with conspiracy, securities fraud and wire fraud by federal prosecutors. At their arraignment in Manhattan federal court yesterday, they were each released on $7 million bond.

The two men were top executives with the Islanders in the 1990s, with Walsh serving as chairman of the team and as a member of the National Hockey League board of governors and Greenwood as an executive vice president.

According to prosecutors, Greenwood and Walsh skimmed more than a billion dollars from investors for their own personal use over the past two years. According to an WG Trading employee cited in the complaint, the money transfer to personal bank accounts was used for “the purchase of expensive collectible items by Greenwood, the purchase of horses by Greenwood, transfer of cash to Walsh’s then-wife, and… the purchase of an apartment for Walsh’s ex-wife pursuant to a divorce settlement.” Greenwood is a horse breeder in Westchester County, N.Y.

Greenwood is also the town supervisor of North Salem, N.Y. The Journal News reports that the Republican is expected to resign the post, to which he was elected in 2007.

The criminal charges come in the wake of an audit of Greenwood and Walsh launched by the National Futures Association earlier this month, as well as a lawsuit from two Pittsburgh universities. The University of Pittsburgh and Carnegie Mellon University filed suit last week seeking the immediate return of the $114 million they invested with the two.

Greenwood’s and Walsh’s Westridge and WG Trading are unrelated to Westgate Capital, which also produced an arrest for hedge fund fraud yesterday, of James Nicholson. In addition, the SEC charged another hedge fund, North Hills Management, with securities fraud yesterday, with that firm’s principal awaiting criminal charges.

Editor's Note

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